offset to save advice

chilly_3

I am considering remortgaging - releasing equity of a further 70k which will cost a total of £215 to complete.

Rather than spending the money. I would keep it offset effectively having an interest free loan. Our monthly payments will increase but mortgage will decrease quickly as the interest would be minimal and therefore the repayment of the capital would be bigger.

As the offset begins to go in our favour - start to move money into a high interest savings account. Also once the mortgage is repayed, although after many years the full 70k would be ours to spend.

The offset mortgage would in effect be a reverse savings account forcing us to make the repayments. If things become difficult I could just repay some of the money offset into the mortgage to get the monthly payments again.

Any advice or comments welcome.

payless

The further £70K may be "forced saving"
but are you getting the lowest % rate on the existing part of your mortgage?

Pal

This doesn't make sense unless you feel that you need quick access to the £70k for something. By offsetting you are not gaining or losing anything - you have neither saved nor borrowed, but you will probably be worse off because offsetting mortgage accounts generally have higher interest rates.

A better way of doing the same thing is to remortgage over a shorter period (for example 15 years instead of 25) at the lowest possible interest rate. This forces you to pay a higher amount and pay the mortgage off faster. Once the mortgage is paid off in 15 years, you can then save the amount you would have been paying into the mortgage until you have your £70k.